Public Bill Committee

[Sir Nicholas Winterton  in the Chair]

Nicholas Winterton: I bid good morning to all members of the Committee who are here; no doubt we shall greet those who are not here a little later. Excellent progress has been made, and I commend the Committee on how it has dealt with this important Bill. My first duty is to ask the shadow spokesman, the hon. Member for Huntingdon, to move new clause 3 formally.

Jonathan Djanogly: I do not wish to move new clause 3, Sir Nicholas.

New Clause 4

Brought up, and read the First time.

Jonathan Djanogly: I beg to move, That the clause be read a Second time.

Nicholas Winterton: With this it will be convenient to discuss the following: new clause 5Hospitality payments
New clause 6Extortion payments

Jonathan Djanogly: Bribery is, of course, a crime that undercuts competitiveness, derails honest companies and distorts the marketplace. Those who bribe and those who are bribed, whether in commercial organisations or governmental institutions, are thereby diminished by their actions, such that their legitimacy is called into question and the confidence of consumers and the public is weakened. Bribery also undermines the societies in which the bribes are made. Under the Bill, Parliament is no longer accepting the excuse of local practice, but tying our flag to the highest levels of international probityaction that is welcomed by the Conservative party.
Part of corruption and briberys inherent problem is that it covers a staggering breadth of behaviour and a multitude of different actions that might be dependent on the circumstances for their criminality. We are talking about a worldwide phenomenon that is not limited by language, geography or political ideology. It is frequently difficult to distinguish between valid payments, such as a legal, agents commission, and the illegal bribing of key individuals in business or public office. Furthermore, variations in the scale of payments or actions hinder easy or clear classification. Bribes are often context driven, and can vary from substantial bribes for multimillion or even billion pound contracts to small denomination bills tucked in the pages of a passport at a pseudo-police checkpoint on a deserted country road in the developing world. Those factors combine to make it exceedingly difficult to pin down exact figures or, indeed, general trends in bribery and corruption practices worldwide, let alone on a country-by-country basis.
I now come to the issue of facilitation and promotional payments, which was considered to some degree in the pre-legislative process in the other place. I also touched on it when debating my amendments to clauses 1, 2 and 6 in our earlier proceedings. Despite that, we remain sympathetic to the airing of the continued worries of business in this area. The International Chamber of Commerce is just one such organisation that has been in contact with us highlighting the fact that there must be an explicit recognition of the need for legitimate promotional expenditure. The ICC gave the example of a United Kingdom company that wished to sell a process to a foreign state company. That company may have to pay experts and purchasing officials in order to travel and stay near the foreign companys facilities, so that the process can be demonstrated. In the United States it would be possible for an American company to obtain clearance from the Department of Justice for such activity. Contracts of considerable economic importance to the UK could be at stake. Of course, the Under-Secretary explained why she does not like the idea of an advisory service, but after our debate it might have to be reconsidered.
Businesses argue that, without spelling out a defence for legitimate promotional expenditure, it is not sufficient to leave companies to the hope that prosecutors may take a reasonable view. The ICC does not agree that including a facilitation payment provision would be a retrograde step. The offence under clause 6, to which such an exemption would relate directly, is, by the Governments own admission, an independent provision standing apart from the more general law of bribery as laid down in earlier clauses. The ICC feels that the potential economic disadvantage to the UK of allowing the Bill to remain unamended or unexplained in that context outweighs any such considerations.
The real point is about proportionality, which goes to the very issue of whether there needs to be an element of dishonesty or corruption in the individuals mindset. We have shown in earlier debates that we support the need to include such a distinction in the offence, although the Committee has come to the conclusion that it will not go into the Bill, and I shall not reopen that discussion. It is certainly arguable that facilitation payments should be outlawed altogether, as a matter of policy. We accept that: such payments invariably violate the law where they are made, and creating a defence under English law for actions that are criminal in the jurisdiction in which they are committed is questionable. Those making such payments might not be able to be prosecuted in their home country, but they would have to keep in mind that, from that moment on, they would be liable to prosecution in the country in which the bribe was made.
The inclusion of a facilitation defence is also seen by some as an invitation to books and records violations, as employees rarely record grease payments accurately in company records. Such payments, it is argued, set a permissive tone, which leads to ever-increasing demands and might corrode the foundations of good governance within the paying corporation. However, that does not account for the realities of global business or travel in developing countries. We also accept that there are a number of cogent arguments in favour of including such an exemption in the Bill. Such payments, given their immaterial size, do not tend to distort trade or the economy, nor to damage economic development in host countries. Unlike major bribery, facilitation payments are not intrinsically anti-competitive, as they rarely create a competitive advantage in contract procurement. Facilitation payments tend to secure for their maker the services to which they are entitled in any event, and no more.
Furthermore, an outright prohibition on facilitation payments might be considered impractical at this time. Such a ban is unrealistic in those countries in which payment of such bribes is endemic. Other countries will not immediately follow the UKs lead and restrict their companies from making such payments, so British businesses would operate at a disadvantage. A prohibition on such payments could be better dealt with multilaterally, at the treaty level, rather than through a unilateral English law, but we do not live in a perfect world. I understand that there are some 35 signatories to the OECD convention, but only eight other states have criminalised facilitation payments: Belgium, Finland, Italy, Luxembourg, the Netherlands, Norway, Slovenia and Spain.
Moreover, an exemption would not exempt a company making payments from being prosecuted under the laws of the state in which they were made, if they were illegal. The company would not be prosecuted in the UK, but such a defence would not exclude it from liability in the foreign jurisdiction. One of the great attributes of modern Britain is its acceptance of other cultures and societies. If facilitation payments are legal and accepted in foreign culturesso the argument goesis there really a need for Parliament to act in such a sanctimonious fashion and decree that British business cannot adapt?

David Howarth: Will the hon. Gentleman concede that, according to the written law of the countries that he is talking about, facilitation payments are not allowed?

Jonathan Djanogly: Yes, I accept that, but I am saying that there are two sides to the argument.
Lord Mackay, speaking in the other place, provided two examples, one of which was borrowed from Lord Robertsons evidence to the Joint Committee:
He referred to the captain of a ship who, when seeking to have its cargo unloaded, was told by the stevedores at the port that it would be unloaded only on the condition that a payment was made to someone nominated by the stevedores, not necessarily to the stevedores themselves. That is a very difficult position for the captain of a ship to be in, and yet, if he paid, the Bill would criminalise his payment. Another example I have come acrossthere are quite a number in this general areais that of someone on a business trip who, in order to board the aeroplane at the airport, has to get a boarding pass. He is asked by the official issuing the boarding pass for money, not to pay airport taxes but as a payment to the man himself.[Official Report, House of Lords, 9 December 2009; Vol. 715, c. 1089.]
Lord Henley gave an example on Report in the other place that drew on the overlap between clause 6 and the issue of facilitation payments. He showed that facilitation payment scenarios are not limited to businessmen from the developed world taking advantage of third-world countries, but can apply in equal measure where the transaction is designed to improve the provision of health care or living standards. Lord Henley said:
As an illustrationin the pharmaceuticals sector, to the extent permitted by local laws in each relevant country, companies operate in line with strict internal codes which usually observe global industry standards around the engagement of healthcare practitioners. In many countries, healthcare practitioners would come within the definition of a foreign public official,
The Bill could therefore criminalise what is currently the honest, lawful, well intentioned promotional detailing of products to doctors in countries such as China, where healthcare practitioners will, for the most part, be employees of a state organisation. In these circumstances, a United Kingdom company could, therefore, not only commit a technical offence under this legislation but also be placed at a disadvantage as against foreign competitors.[Official Report, House of Lords, 2 February 2010; Vol. 717, c. 124-125.]
The Government will no doubt respond that it will be for prosecutors to distinguish between legitimate and illegitimate corporate hospitality, and to decide whether it would be in the public interest to bring a prosecution, as Lord Tunnicliffe indicated to Lord Henley in the other place by letter on 14 January 2010. However, the argument is that that might not be sufficient, which takes us back to the problem with prosecutorial discretion that we have outlined throughout these debates. We believe that it is not correct to expect businesses to instruct employees that a certain course of action, while theoretically falling foul of the legislation, may nevertheless be proceeded with because prosecution is unlikely. Will the Under-Secretary specify whether prosecution policy will be issued on that area? For example, if a certain degree of hospitality is allowed, will a certain level of facilitation payments be ignored? To allow one but not the other could be called inconsistent.
In 1999, Australia became party to the OECD convention on combating bribery of foreign public officials in international business transactions. The Australian Government subsequently introduced changes to the relevant tax and criminal legislation. The Commonwealth Criminal Code Act 1995 makes it a criminal offence to bribe a foreign public official, whether in Australia or elsewhere. That means that Australian citizens and corporations can be prosecuted for actions undertaken overseas. The penalties for bribery include up to 10 years imprisonment and substantial fines. Division 70.4 of that Act provides a defence for facilitation payments, stating that a person is not guilty of an offence if: first,
the value of the benefit was of a minor nature,
the persons conduct was engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature,
as soon as practicable after the conduct occurred, the person made a record of the conduct.
In the USA, the Foreign Corrupt Practices Act exempts
facilitation payments for routine government action.
The FPCA was a response to the involvement of some of Americas largest companies in massive bribery scandals domestically and abroad. US businesses protested against the restrictive and unclear provisions of the FCPA, claiming that they reduced the competitiveness of American companies operating internationally. The US Omnibus Foreign Trade and Competitiveness Act 1998 was passed to meet those concerns. That Act made a number of amendments to the FCPA, which included clarifying the exemption for small paymentsso-called facilitation paymentsby American companies to secure the provision of routine governmental services abroad. My point is that this could be a wasted opportunity if we do not learn the lessons from the US. It took the United States 11 years to realise that a blanket prohibition on bribery was impractical in a globalised corporate world.
If I may, Sir Nicholas, I should like to turn briefly to the Joint Committees findings on facilitation payments, as I suspect that the Under-Secretary will want to address them. We accept that the Joint Committee came down in favour of criminalising facilitation payments, but that conclusion was not unqualified. In highlighting the problems it recognised, the Committee referred to various pieces of evidence, and its report states:
The law firm, Reynolds Porter Chamberlain, expressed grave concerns that UK business would be put at a competitive disadvantage compared to businesses from states - such as the US - where a legal exception was provided. It called for the draft Bill to include a defence similar to that in the US. It also noted that reliance on prosecutorial discretion caused difficulties for organisations with reporting obligations under the Proceeds of Crime Act 2002
There are undoubtedly difficult and unanswered dilemmas facing business, as Lord Robertson illustrated: stevedores on the docks of a country say they will not unload your ship unless a payment is made to their union or to their corporate organisation, what do you do? You say, No. We will just let our ships lie there.
These dilemmas were manifest in the fact that the UK Anti-Corruption Forum's members were unable to reach consensus on the approach that should be taken. While the Forum is strongly in favour of treating facilitation payments as an offence for acts within the UK, it noted the need for caution in the international arena: It is an extraordinarily difficult problem and [ t]here is a range of opinion from those who feel that facilitation payments should be outlawed to those who feel that they should not be a matter for the criminal lawVery often, the person who is paying the facilitation payment is, in effect, the victim of extortion and very often that is junior employees in quite difficult situations with traffic police or immigration officers, or whatever it may be.
At the same time we recognise that business needs clarity about the circumstances in which facilitation payments will be prosecuted, particularly given the difficult situations that can arise. Therefore the basic principles of prosecution policy, which we would expect to adhere firmly to the concept of proportionality, must be made clear.
The new clauses that I have tabled on hospitality and extortion payments pick up some of the ideas that came through in the evidence and the debates in the other place, and represent an attempt to consider the problem from a different perspective. For instance, the UK Anti-Corruption Forum thinks that when a facilitation payment is paid as a result of extortion, the payer, far from being a criminal, is actually the victim.
The Joint Committee recognised that the hospitality payment was a legitimate part of doing business at home and abroad, provided it remained within appropriate limits. There was considerable support for a defence for reasonable hospitality payments. The director of the Serious Fraud Office believed that that was a sensible approach since
most routine and inexpensive hospitality would be unlikely to lead to a reasonable expectation of improper conduct. This would therefore not trigger the general offences."
general offences impose an appropriate limit on this activity under the improper performance test. However, the main limit under clause 4 is based on prosecutorial discretion. We are content with this and call on the Government to reassure the business community that it does not risk facing prosecution for providing proportionate levels of hospitality as part of competing fairly in the international arena.
As legal commentators have stated, it is important that a bright line is drawn
signalling the point past which individuals subject to that law cannot go. This is particularly so when there are serious criminal sanctions for crossing the line. Clear standards make it easier for companies bound by the rule to manage across a variety of cultures and regimes.

David Howarth: The arguments have been rehearsed not only during the Bills passage through the other place, but during our previous debates in this Committee, so I will be brief.
The hon. Gentleman was right to concentrate solely on clause 6, because all his points applied only to clause 6, although his new clauses also apply to clauses 1 and 2. Under clauses 1 and 2, the intent to induce improper conduct deals with all his points, so we are really talking only about clause 6, which is about bribing foreign officialsthe most serious of the crimes that we are creating in the Bill. Such bribery is not only about the economic situation that the hon. Gentleman mentioned; it is about the corrosive effect on good government in those countries. For that reason, we should not be tolerant of any form of bribery of foreign officials at all.
The straightforward fact about facilitation payments is that they are bribes. They are a slightly different type of bribe, in that they get someone to do something that they should have done anyway, as opposed to something wrong that they would not otherwise have done. Both, however, are examples of doing the wrong thing for money, which is properly covered by the description bribethe type of thing that the Bill is trying to stop. I tried to make it clear in my intervention on the hon. Gentleman that so-called facilitation paymentshe readily concedes thisare illegal according to the law of the countries that he cited.
That leads me to the point that the hon. Gentleman tried to make about custom and practice in other countries. The only authoritative guide that we in this country can apply to the public policy of another country is what its law says. If its law says that such payments are illegal, we are not in any way denying the validity of its culture by going along with its public policy. As long as its public policy says that the payments are illegal, that is what our law says as well. That is why clause 6(3)(b) deals with whether action by a foreign official is
neither permitted nor required by the written law applicable to
The hon. Gentleman says that it is all about prosecutorial discretion, but it is not. It is also about the burden of proof, because under that clause the burden of proof of showing that whatever was done was contrary to the law of the other country must be on the prosecution, and that must be proven to the criminal standard. The questions that the hon. Gentleman raises will therefore not arise in practice. It will not be a matter of prosecutorial discretion; it will simply be a matter of whether there is proof that what was done was contrary to the written law of the other state.
Extortion is not a crime in Englandit was abolished under the Theft Act 1968but it is a crime in Scotland, so it is interesting that the hon. Gentleman is using Scottish criminal concepts in a British statute [Interruption.] If a legislative consent order comes through, it would be British. It is interesting that his attitude to devolution seems to be changing, as he is now adopting criminal law concepts from Scots law.

Jonathan Djanogly: I went further than that. I gave the hon. Gentleman some useful Australian and American law as well.

David Howarth: The point is that English law has the concept of blackmail, which replaced extortion in 1968.
The debate raises a more serious issue: should people be excused a breach of the criminal law because of circumstances in which they are threatened by criminal acts carried out by other people? We in this country have always taken a very strict view on that. The defence of duress in criminal law basically applies only to people who are threatened with serious injury or death. That might be the case in some of the examples that the hon. Gentleman cited, but we have never gone beyond that view for the very good reason that people of reasonable fortitude with a commitment to the rule of law do not give in to demands that they commit criminal acts except in the most dire circumstances. For that reason, I oppose new clauses 4 to 6.

Claire Ward: It is good to have you back in the Chair, Sir Nicholas.
While listening to speech made by the hon. Member for Huntingdon, I was at first rather hopeful because it seemed that he understood the policy objectives of the Bill and that he was setting them out clearly. However, new clauses 4 to 6 would drive a coach and horses through those policy objectives. Frankly, they would create exceptions for various payments and expenditure on the part of commercial organisations that would be not only unnecessary but undesirable if we are to uphold the Bills clear policy objective that bribery is unacceptable.
New clause 4 relates to small-scale bribes that are paid to expedite action by Government officials or to prevent damage to an important interesteffectively facilitation payments. The new clauses drafting illustrates the problems encountered when trying to create an exemption for facilitation payments. For example, the new clause appears to cover bribes paid to expedite routine action on the part of both foreign and domestic public officials, but I am not sure whether that is the hon. Gentlemans intention. Moreover, the conditions set out in paragraphs (a) to (e) are open to wide and subjective interpretation. What are companies and courts to make of terms and ideas such as reasonable in amount, customary in the situation or the only
reasonable alternative in the circumstances?
The new clause would have an adverse impact on the effectiveness of the Bill. In particular, it would jeopardise one of its key policy objectives of supporting national and international efforts to bring about a shift away from a culture that tolerates bribery. We understand that petty corruption in emerging markets and other countries can be a problem for UK companies. There is no doubt that they occasionally face demands for facilitation payments in the sort of circumstances that the hon. Gentleman described that amount to blackmail or extortionif we are using the Scottish term. The answer, however, is not to create exemptions such as those in the US Foreign Corrupt Practices Act, which have created artificial distinctions. The answer is to face the challenges head on. That is the approach of the OECD, which recently issued a recommendation calling on member countries to review their policies and approaches to small facilitation payments periodically to combat the phenomenon effectively.
We do not want to be in the situation in which the Americans will no doubt find themselves over the coming years of playing catch-up to raise standards. We need to take the opportunity to legislate to set the highest possible standards and to send a clear and unambiguous message that bribery in whatever form, and whatever the size of the payment, is a crime. A payment, no matter how small, that is made to a foreign public officialfor example to induce an official or to reward the improper performance of their functionswill be an offence under clause 1. Payment to facilitate the performance of that officials functions to secure an advantage in the conduct of business will be an offence under clause 6, unless the local written law permits the official to be influenced by the payment.
All prosecutions in the UK are, however, subject to review under the principles set out in the code for Crown prosecutors. If a case involving such payments came to the attention of prosecutors, it would be subject to review by a Crown prosecutor applying both the evidential and the public interest test. I should add that, typically, it would be for the Crown Prosecution Service rather than the Serious Fraud Office to look at such cases, as the SFO has a £1 million case threshold. In any event, should the CPS consider a case of this kind, I would expect factors such as the small scale of the payment or the presence of circumstances that amount to extortion on the part of the receiver of the bribe to weigh heavily against a prosecution. I must stress, however, that such decisions are entirely a matter for the independent prosecuting authorities, and I believe that that is the right way to proceed.
New clause 5 seeks to create an exception for corporate hospitality that would apply both to the recipient of hospitality and the provider. I want to make it clear to the Committee and to businesses taking an interest in the Bill that it is not our intention to inaugurate a crack down on reasonable corporate hospitality, we do intend to put in place a law that is clear, certain and unambiguous and this exception, however the hon. Gentleman describes it and whatever the motivation behind it, will introduce ambiguity and uncertainty.
It is important to make clear the way in which different offences in the Bill engage with corporate hospitality. Under the general offences in clauses 1 and 2, the hospitality would have to be given and received with the intention of inducing someone to perform a function improperly in order to attract liabilitythe very point that the hon. Member for Cambridge was making. It would therefore need to be given or received in order to induce a breach of an expectation that someone would act impartially, in good faith or in accordance with a position of trust.
In some cases, the receipt of hospitality itself may amount to an improper performance of a relevant function, and in those circumstances the provider of the hospitality would need to be aware of that fact. Hospitality that is commensurate with the prevailing norms is very unlikely to give rise even to a suspicion of either of those sets of circumstances. The measure would only apply where there is a clear evidential link between the hospitality and improper conductin circumstances, perhaps, where the hospitality is wholly excessive could any question of impropriety possibly arise.
The situation under clause 6 relating to bribery of a foreign public official is different, as the focus would be on hospitality provided to a foreign public official with the intention of influencing that person in his or her official capacity to obtain business or an advantage in the conduct of business, where the local law does not require or permit the official to be influenced by the hospitality. Corporate hospitality will invariably be provided to make potential customers, whether foreign public officials or anyone else, more favourably disposed to the provider of the hospitality in the hope that that will lead to a future commercial opportunity or advantage. To the extent that reasonable hospitality is a normal part of business, we are not seeking to discourage such practices.
Let us be clear, however, about this. Where the facts disclose that excessive hospitality provided for a foreign public official was significantly instrumental in securing business, we consider it right to regard that as bribery, unless the local law expressly permits or requires the foreign public official to be influenced by corporate hospitality. In any event, I can assure the hon. Member for Huntingdon that any case coming to the attention of the police or prosecutors would be examined on its individual merits. If a case involving corporate hospitality came to the attention of the investigating and prosecuting authorities the public interest might not be best served by a prosecution unless, as I have already said, the hospitality was excessive or unreasonable.
There is another aspect of new clause 5 that warrants mentionis the phrase,
as specified in the guidance to be provided pursuant to section 9.
Finally, new clause 6 seeks to create an exception for any bribe paid under circumstances that amount to an act of extortion. Curiously, it would also provide a defence to the recipient of the bribe who presumably is the person seeking to elicit the bribe through blackmail or extortion. However, setting aside that strange aspect of the clause, that exception would serve no useful purpose and would introduce a new subjective element to the definition of the offences that could be exploited by the unscrupulous.
In considering any case of bribery, prosecutors would be under a duty to consider all factors relevant to the question of whether the public interest demanded a prosecution. The hon. Gentleman asked whether we would issue guidance to the Crown Prosecution Service or to other prosecuting authorities. As I am sure he is aware, it is a matter for the directors of each of the prosecuting authorities to determine the appropriate guidance required by their prosecutors. It is not for the Government to issue such detailed guidance.
Clearly, the presence of facts that could amount to extortion on the part of the payee is a factoras I have already mentioned when addressing facilitation paymentsthat would weigh quite heavily against the prosecution of the payer. On the other hand, the use of a subjective term such as extortion in statute would create ambiguity and uncertainty in the law. The hon. Member for Cambridge has already given other reasons why there may be an issue with it. Finally, new clause 6, like new clause 5, includes the phrase,
as specified in the guidance to be provided pursuant to section 9.
I hope I have persuaded the hon. Member for Huntingdon that this is not the way to proceed with the legislation. I do not think that his view is widely shared, even by those in other parts of the Conservative party who take an interest. The Conservative partys working group on responsible business produced a report, which it hopes will provide a basis for a future Conservative Governmentit can dream on. The report recommended that
a future Conservative government demonstrate its commitment to ensuring that British companies are not engaged in corruption by rigorously enforcing those elements of the 2001 Act that embody the OECD anti-corruption convention.
While it will have a long time to wait for a Conservative Government to be in such a position, the reality is that these proposed new clauses do not rigorously enforce the elements of the 2001 Act, by providing the sort of exemptions that the hon. Gentleman wishes to see. On that basis, I hope that he will withdraw them.

Jonathan Djanogly: I should start by saying that I was the only MP on that Conservative group for responsible business, so the Under-Secretary can see where my personal opinions lieI endorse the groups findings.
Let me run through a few points that came up in a helpful debate. I shall begin with the remarks of the hon. Member for Cambridge, who said that the proposed new clauses did not apply to clauses 1 and 2. I am not sure if that is the case, but I accept that the question would be, for example, whether hospitality would be improper under those clauses. I think he implied that the provisions were not relevant and therefore should be stripped out.

David Howarth: I simply said that all the hon. Gentlemans arguments would fall under clause 1, and that it would be impossible to prove the necessary intent. Obviously, his new clauses do technically apply to those parts of the Bill but his arguments did not work for them.

Jonathan Djanogly: I thank the hon. Gentleman for his clarification. I accept that the issue mainly relates to clause 6. I think the hon. Gentlemans main point is that the proposed new clauses did not work because we had to look at the law of the country concerned. I am not saying that we should not, under the Bill, be looking at anything other than the law of the country concerned.
The question posed by the new clauses is whether there should be a de minimis carve-out. It is not a question of the principle; it is the question of the carve-out. Clearly, in the hon. Gentlemans black and white academic world, there should not be. I can tell him that significant parts of the business community are concerned about issues in these debates that relate to having a definite way forward. On the use of blackmail rather than extortion, I am open to his suggestions.
With regard to the Under-Secretarys points, the new clauses tabled on a probing basis. They were designed to elicit a response to concerns that the Bill will be applied in a way that is realistic to the demands of business operating in a complicated global economy. She went some way towards outlining the parameters of corporate hospitality, but the outcome of what she has said does not represent absolute clarity and will have to be tested in the courts. That is where we are. Of course, it is for prosecutors to decide prosecution policy, but with three different prosecutors, the possibility of confusion is not reduced. We will have to look at that very carefully in future. I am happy to have debated the new clauses and, on that basis, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 7

Brought up, and read the First time.

Jonathan Djanogly: I beg to move, That the clause be read a Second time.
The new clause follows on from our earlier debates on the Proceeds of Crime Act 2002 and its interplay with the penalties under the Bill. As well as being subject to an unlimited fine if successfully convicted, corporations are concerned about how the confiscation regime under POCA might relate to the offence. I touched on this issue on Second Reading when I asked the Secretary of State whether the Government appreciated that the sentencing guidelines conflict in some ways with other sentencing powers, particularly POCA. Businesses say that people might not come forward, because once they have been convicted under the Bill, they might be liable to prosecution and penalties under other legislation. The Secretary of State said that he would look at the issue, so I ask the Under-Secretary whether the Government have indeed looked at it. I look forward to hearing her response.
Although we accept that there is a morally defensible position that those convicted of a criminal offence and who have received proceeds in a criminal way should pay those proceeds back, we are not entirely convinced that the interplay between the statutes is stated clearly enough. POCA was designed to deprive individual defendants, particularly drug dealers and organised criminals, of the benefits of their criminal conduct. However, there has been no acknowledgement or recognition that there could be serious implications for companies caught by the legislation, which in some cases could see them being put out of business if the full weight of the law were applied. The fact that businesses wish to draw POCA to the attention of Parliament during our debates on the Bill highlights how unsettled they are by the introduction of a strict liability offence to which the defence is vaguely worded.
In the other place, Lord Tunnicliffe responded to Lord Henleys queries on the matter by stating:
Under the Proceeds of Crime Act 2002, the exercise of confiscation powers is directed towards the recovery of the proceeds of crime. It is not intended to be punitive in effect. We are satisfied that the courts will take into account all relevant information.[Official Report, House of Lords, 7 January 2010; Vol. 716, c. GC52.]
Neil Gerrard, head of the litigation and regulatory group for DLA Piper, published an article at the end of last year addressing the issue and the potential deterrent effect on companies considering self-reporting to the Serious Fraud Office. The SFO is trying to encourage companies to engage with it to report wrongdoing, in return for which it will use civil penalties wherever possible instead of criminal sanctions, but will not give guarantees or further guidance.
The Committee may wish to consider as a model the recent corruption case involving Mabey and Johnson, in which the company engaged constructively with the SFO in return for a plea agreement in both quantum and terms. The penalties on the company totalled £6.6 million, £1.1 million of which was confiscated. However, because the date of the earliest offence charged against Mabey and Johnson was 1993, the confiscation was determined under the Criminal Justice Act 1988. For offences committed after November 1995, the confiscation regime is more draconian, as determined under POCA. Those rules include a mandatory obligation on the court to conduct a confiscation inquiry if the prosecutor asks for a confiscation order. However, even if the prosecutor decides not to ask for one, the court has discretion to conduct an inquiry in any event. However, it has no discretion in determining the amount to be confiscated, with the calculation of benefit from criminal conduct determined by statute.
Given those restrictions, according to Mr. Gerrards article, I understand that a judge cannot simply ratify the plea agreement and the agreed sums as was done in the Mabey and Johnson case. Therefore, while under the CJA regime, Mabey and Johnson paid £1.1 million in confiscation, the sum at risk of confiscation under POCA would have been as high as £60 million. That sum represents the strict statutory application of the benefit or value of the contracts, rather than any profit obtained from the offences committed.
Will the effect of the overlap between POCA and the Bill be to drive companies out of business altogether? If that is not the intention, will the Under-Secretary explain how such a drastic scenario can be avoided? Clearly, if such a powerful disincentive were to prevent self-reporting by companiesas it no doubt wouldthe efficacy of the SFOs hoped-for new regime of corporate responsibility could be brought into doubt, which is not in anyones interests.

David Howarth: Again, the new clause concerns a matter that we have discussed before, so I will only add one point to what I have said. I oppose the idea of separating the POCA powers and making them inapplicable in such cases, for the simple reason that what lies behind the Proceeds of Crime Act and its predecessors is the notion that stripping a criminal of all the benefits of crime is a deterrent. It is a way of ensuring that people think twice before going into such activity in the first place, as they would obtain no gain from it.
The hon. Gentleman is right about rigidity of calculations under POCA compared with previous regimes, and he described the procedure in which that would happen. Normally, a prosecutor would threaten to use POCA to secure a settlement. That puts the prosecutor in a better position than would be the case under the new clause, and I do not want to undermine the powers of the prosecutor in any way at all.
The hon. Gentlemans only point is that a judge has the discretion to start the whole process on their own motion. That is the only risk herea judge might upset the whole arrangement agreed between the defendant and the prosecution authorities. I honestly think that the risk is very low. The hon. Gentleman shows no faith in the judiciary, which is not, if thinks about it, something he would wish to repeat. There is a technical point in his favour, but it is not strong enough to support his new clause.

Claire Ward: As the hon. Member for Huntingdon has explained, the new clause would confer protection on individuals or other persons prosecuted for an offence under the Bill from any other proceedings, whether under POCA or any other statute, in respect of the facts that gave rise to the proceedings under the Bill.
The hon. Gentleman is particularly concerned about the application of the confiscation provisions under POCA. He mentioned on Second Reading that many businesses to which he had spoken have expressed concern that further action may be taken against companies convicted under the proceeds of crime legislation, and that the financial penalties that would be imposed could threaten their businesses.
First, I wish to clarify the fact that the matter is not about companies convicted of an offence under the Bill being exposed to double jeopardy. The confiscation regime under POCA is designed to deprive the offender of their benefit from crime, which is an entirely correct approach. The confiscation powers under POCA are not solely directed at drug dealers and armed robbersuseful though they are in those respects. The powers exist in respect of any offence if offenders secure a financial advantage from their crimes. The Act does not just apply to individuals; it also applies to companies and other legal persons convicted of any such offence.
To provide immunity of the sort proposed by the new clause would be unprecedented. I do not see why individuals or commercial organisations convicted of offences under the Bill should be singled out for immunity from legislation that Parliament has determined should apply following conviction. Bribery is a serious offence and should be treated as such. I am sure that the hon. Member for Huntingdon is not really saying that people convicted of a bribery offence should be able to retain the benefits from their crimeI hope that is not what he thinks should happen.
So far as the Proceeds of Crime Act is concerned, it is for the court to determine the benefit derived from an offence in any individual case. The courts decision will be informed by a statement of information, prepared by the prosecutor, identifying the defendants benefit from their criminal conduct. The defendant has an opportunity to respond to and contest any assertions in the statement of information. Section 13 of POCA requires the court to have regard to the confiscation order before imposing a fine or other order involving payment on the defendant, except for a compensation order. Otherwise the confiscation order is left out of account in sentencing the defendant. I have every confidence that the courts will exercise their powers of confiscation on the basis of accurate information and in a just and appropriate manner.
The hon. Gentleman was concerned on Second Reading that the existence of confiscation powers would make it less likely that companies would self-report allegations of bribery. I do not accept that that would be the case, although the prospect of the proceeds of a crime being confiscated should act as a deterrent against committing the offence in the first place. If that is not seen to be the purpose of the Bill, we have not got the policy objectives across in all the time we have spent in Committee and in the previous work.
Furthermore, the Serious Fraud Office has indicated in guidance on self-reporting bribery that, in appropriate cases in which the commercial organisation demonstrates that it is prepared to act responsibly, there is the prospect of a negotiated settlement with a civil outcome rather than a criminal prosecution. Such examples ensure it is the right way to deal with the facts of the case.
The proposition of total immunity, however, goes wider than POCA, to cover proceedings under any other statute arising from the same facts. That would potentially encompass many other types of proceedings, such as those relating to compensation orders, serious crime prevention orders under the Serious Crime Act 2007 or the disqualification of directors under the Company Directors Disqualification Act 1986. Again, I am not sure whether the hon. Gentleman intended his new clause to have such consequences, but we see no justification for creating an immunity to such proceedings for someone convicted of a serious offencebribery. That is contrary to what Parliament intended.
Bribery is a serious crime that needs to be addressed accordingly. The inclusion of the new clause would seriously impair the effectiveness of the Bill, as I have said of previous new clauses. The Joint Committee on the draft Bribery Bill, on which the hon. Gentleman served, stated in its report that
the Bill must have teeth.

Jonathan Djanogly: Let me first say in reply to the hon. Member for Cambridge that I have every confidence in our judiciary.
I was pleased to move the new clause, which gave us an opportunity to probe the interaction of different legislation. Of course financial advantage should be repaidI totally agree with the Under-Secretary about that. The question is whether the new interaction of laws will reduce the chance of companies coming forward and self-cleaningas I think my hon. Friend the Member for North-East Hertfordshire described it. The Under-Secretarys view is that that will not be the case, and I am certainly happy to hear that.

Oliver Heald: I am in favour of self-cleaning as well, but self-cleansing was what I said.

Jonathan Djanogly: The approach to the matter taken by prosecutorsand indeed judgesin the initial cases will be vital, as businesses will be looking on as decisions are made.
On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Ordered,
That certain written evidence already reported to the House be appended to the proceedings of the Committee.(Claire Ward.)

Nicholas Winterton: Before I put the last Question to the Committee, may I say that this is the last Bill I shall chair during my parliamentary career in the House of Commons? I have served on the Chairmens Panel for just under 25 years. It has been a tremendous pleasureoften a challenge, but very enjoyable. I say to Back Benchersthere are also Ministers to come, and shadow Ministers, on the Back Benchesthat there is an alternative career in the House of Commons, which is serving the House on the Chairmens Panel or in other ways. I hope that that career structure will be used increasingly, because it is good for the House to have Members who are committed to the service of this magnificent Parliament.
I congratulate the hon. Member for Watford on the job she has done as the Government Minister on the Bill, and the hon. Member for Huntingdon on the way in which he has represented Her Majestys Opposition. It is always a pleasure to listen to the hon. Member for Cambridge; I know that Parliament will miss him when he steps down and returns to law at the university. We wish him well. All those who have contributed to our proceedings have added to the Bill. I thank the congregation of Clerks whom we have had during these short proceedings. It is always very helpful to any Chairman to have someone sitting by their side who can, if we forget what we are supposed to be doing, quickly bring us back to reality and give us the advice we need.
Hansard is always impeccable. The police and the doorkeepers who ensure that we run an effective and efficient Committee are to be thanked for their service. The agreeable Whips on this Bill should also be congratulated. Looking round the Committee, I see three hon. Members who will not be standing for Parliament again. I thank them personally for the service they have given not only to the House, but to their constituents and to the country, in the role they have fulfilled. It has been a pleasure to get to know many such Members well.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Claire Ward: I thank you, Sir Nicholas, for your chairmanship of the Committee, and your co-Chair, Ms Walley. I know that you are off to new pastureswherever that may beand to a new life outside Parliament. We wish you well in what you choose to do. It is incredibly important that we have people throughout the parties who believe wholeheartedly in the role of Parliament and the work we all have to do as Members. Whatever happens after the general election, there will be, by the very nature of so many people deciding not to seek re-election, a very different Parliament in the summer. We have much to learn from those who have gone before, particularly regarding chairing a Committee such as this, which you have done very agreeably. You have ensured that, even in moments of difficulty and disagreement, we have got through this important legislation.
I join you, Sir Nicholas, in thanking those who have enabled us to get through the Bill. I thank the hon. Members for Huntingdon and for Rugby and Kenilworth for their, at times, constructive and interesting debate; the Clerks; Hansard; the doorkeepers; the police officers; all members of the Committee, of course; and the Bill team and my officials, without whom life would be not just difficult, but frankly impossible. I thank them for all their hard work. I spent many years sitting where my hon. Friend the Member for Warrington, North is sitting nowin the Whips chair. This is the first full Public Bill that I have taken through, and everybody here has ensured that it has been both an enjoyable and relatively easy task. I thank you, Sir Nicholas, and take this opportunity to wish you well in the future.

Jonathan Djanogly: May I join the Under-Secretary in congratulating to you, Sir Nicholas, on the way in which, with your normal fairness and good humour, you have guided us through the Bill, and in wishing you well in your retirement? I am certainly very sorry that this is the last of the many Bill Committees that you have chaired on which I have had the privilege to serve. I also congratulate Ms Walley on what was her first Bill Committee; may she chair many more. I thank those who have contributed to making the Committee happen: the Clerks, the doormen and the police. I wish the hon. Member for Cambridge well in his return to academia, and I thank all members of the Committee for giving up their time to consider this important legislation.

David Howarth: May I add my thanks to you, Sir Nicholas, and my appreciation for the way in which you have chaired Bill Committees in the few years that I have been here? In every case, you have enabled the debate to flow and ensured that important points were made, but that in the end, the work was done. Your principle, that that should be possible without recourse to procedural interruptions such as knives, is a model of how such things should be done. I, too, wish you well in your future outside the House. I also thank the Clerks and the Bill team, who seemed very much engaged with the Billit is a tribute to them that it has got through this stage with such dispatchand all the other members of staff who helped the Committee to get its work done in time.
As hon. Members have mentioned, this is not just your final Bill Committee, Sir Nicholas: it is also mine, unless something very odd happens that we do not expect in the next few days and weeks. The way you chair Committees means that we get the work done and we examine the Bill clause by clause. The way government is set up means that rarely can Governments say, That was a good idea and we will accept it, so Committees can be frustrating exercises. I am sure there is a better way of doing it. I shall go away and think about what that might be in my academic career, but given that this is the way we do things now, Sir Nicholas, you do it better than anybody else. Thank you very much.

Tom Levitt: Unusually, I rise from the Parliamentary Private Secretary Bench, but then I am not a PPSI just happen to be sitting here. I want to add my thanks to all those who have already been mentioned: to members of the Committee; and to all who have helped make this Committee effective, especially you, Sir Nicholas. We share a boundary and a love of the Peak district; the second will continue, if not the first.
If I may, I want to sound one note of reminiscence and nostalgia. In 2002, I represented the House at a conference in CanadaI was then a member of the Standards and Privileges Committeeat the inaugural meeting of the Global Organisation of Parliamentarians Against Corruption, which in some parts of the world has become a very effective organisation, helping particularly in emerging democracies. At that conference, the OECD documentation was applauded and commitments were made, and I am touched, having had four years in the Department for International Development as a PPS, that my final Bill should be bringing that commitment to the OECD principles into effect. It is therefore a slightly nostalgic momenta nice nuance.

Nicholas Winterton: Indeed it isa nostalgic moment for a number of us. I thank members of the Committee for their generous remarks. I have allowed Members comments to range widely; we had time, and I felt it appropriate to allow that at the end of a Parliament.
I have left it to the very end to say thank you to my co-chair, Joan Walley. It was her first Bill and she did a magnificent job; I wish her well and I shall personally thank her when I see her later. It has been a very pleasant Bill Committee to chair, and I thank again all members of it for their very generous remarks.
Thirty-nine years, almost, in this place is quite a lifetime, but I do not regret a single minute of it, and if I had the opportunity to live my life again, I would do things in no different way. Perhaps that, in a way, is what somebody should say at the end of their House of Commons career.

Question put and agreed to.

Bill accordingly to be reported, as amended.

Committee rose.